Suppose that all workers place a value on their leisure of 40 goods per day.The production function relating output per day Y to the number of people working per day N is Y = 200N - 2N²
And the marginal product of labor is
MPN = 200 - 2N.
A 20% tax is levied on wages.Output per day would be

Question

Quizplus · Accepted Answer

When a 20% tax is levied on wages, workers receive only 80% of their original wage, which means their wage becomes 32 goods per day (40 * 0.8 = 32).

To find the optimal number of workers, we need to find the point where the marginal cost of labor (the wage, which is 32 in this case) equals the marginal product of labor (MPN).

Setting MPN = wage, we get:

200 - 2N = 32

Solving for N, we get:

N = 84

So the optimal number of workers is 84.

Plugging this value into the production function, we get:

Y = 200(84) - 2(84)^2

Y = 9375

Therefore, output per day would be 9375.

Suppose That All Workers Place a Value on Their Leisure